Starbucks: V-I-A Is a Joke

So Starbucks has introduced the latest coffee innovation, the one the world has been waiting for with its collective breath bated: Instant coffee.

Oh, but it's Starbucks instant coffee, the company protests. It's better. It's indistinguishable from the coffee you get in a Starbucks store. And to prove it, they're putting on taste tests, where you get a couple ounces of their brewed stuff and a couple ounces of the Via instant coffee, and are challenged to tell the difference.

Since I'm in the Seattle area, the land of Starbucks, I decided to take the challenge. Make that the so-called challenge. Which one is the Via? The one that tastes like watery instant coffee. Sorry, Starbucks.

Does Starbucks Need a Triple-Shot Venti?

Yesterday morning, Amy and I were having breakfast at Santa Monica's 18th Street Coffee House (which actually looks like my concept of a coffee house -- lots of dark wood finishes). I read Amy an article from the LA Times about how last quarter visits to Starbucks stores fell for the first time since -- well, ever. The way every head swiveled around to look at us, you would have thought I had mentioned E.F. Hutton. (That's a reference that will be lost on anyone under 30.)

The fall in Starbucks attendance strangely coincided with an increase in the price of drinks chain-wide (four months ago), a dip in the chain's stock, and rising gas prices (not to mention the sub-prime mortgage debacle) that have led some to believe that perhaps a $4 a day latte habit is not, financially, a good idea.

Throw in the number of local coffee bars that have taken a page from Starbuck's playbook and charge nearly identical prices for the same types of lattes, cappucinos, and froufrou drinks, and you'll find the Starbucks mermaid facing some rough seas ahead.

Perhaps a good starting point for Starbucks to regain its momentum is to reconsider its previous strategy of saturating the market with stores like a spilled machiato saturates a bar-towel. At some point, too many Starbucks is too many Starbucks. If you can hardly take a step without tripping over a Starbucks, it stands to reason that the sales in each store is going to go down.

Too Much Air in the Cappucino?

According to this article in Fortune Magazine, Starbucks' stock may be trading at a Venti price despite a Doppo value. Apparently, following General Accounting Principles, 'Bucks exempts the cost of its stores' leases from the debt portion of the balance sheet. Those add up to $2.7 billion, or 10% of the company's net worth. They're probably not in actual trouble (at least as long as they avoid Krispy Kreme type expansion mistakes), but this news might make investors wake up and, well, you know . . . .